Which Buy-Side Institutions Participate in Public Earnings Conference Calls? Implications for Capital Markets and Sell-Side Coverage

54 Pages Posted: 15 Feb 2016 Last revised: 19 Apr 2021

See all articles by Andrew C. Call

Andrew C. Call

Arizona State University (ASU) - School of Accountancy

Nathan Y. Sharp

Texas A&M University - Department of Accounting

Thomas Shohfi

Rensselaer Polytechnic Institute (RPI) - Department of Finance and Accounting

Date Written: January 16, 2021

Abstract

We examine the participation of analysts from different buy-side institutions (hedge funds, mutual funds, and RIAs) in public earnings conference calls and the associated capital market implications. Using 81,652 conference call transcripts for 3,346 companies from 2007 to 2016, we find that buy-side analysts ask questions on approximately 18% of calls. Relative to sell-side analysts, buy-side analysts’ interactions with management are shorter, convey less favorable tone, and exhibit more uncertainty. Buy-side activity on earnings calls is also associated with subsequent reductions in sell-side coverage, and buy-side tone is associated with sell-side analysts’ price target revisions after the call. Importantly, our findings suggest that buy-side analysts representing a hedge fund play an important and unique role on conference calls. Specifically, hedge fund analysts represent nearly half (47%) of all buy-side appearances. In addition, when short interest in the firm is high, analysts representing a hedge fund are less likely to be permitted to ask the first question on the call, to ask lengthy questions, or to ask additional follow-up questions. Relatedly, relative to other buy-side analysts, the information conveyed by hedge fund analysts during the call is more strongly associated with both stock returns and investor uncertainty following the call.

Keywords: buy-side analysts, earnings conference calls, institutional investors, hedge funds, sell-side analysts, tone

JEL Classification: G10, G20, G23, G24, G29, D82, M41

Suggested Citation

Call, Andrew C. and Sharp, Nathan Y. and Shohfi, Thomas, Which Buy-Side Institutions Participate in Public Earnings Conference Calls? Implications for Capital Markets and Sell-Side Coverage (January 16, 2021). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2731930 or http://dx.doi.org/10.2139/ssrn.2731930

Andrew C. Call (Contact Author)

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

Nathan Y. Sharp

Texas A&M University - Department of Accounting ( email )

4353 TAMU
College Station, TX 77843-4353
United States
979-845-0338 (Phone)

Thomas Shohfi

Rensselaer Polytechnic Institute (RPI) - Department of Finance and Accounting ( email )

Pittsburgh Building
110 8th street
Troy, NY 12180
United States

HOME PAGE: http://shohfi.com/

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